Construction groups seek strength in numbers

17/09/2007 -- 11:26 AM

Ha Noi (VNA) – Minister of Construction Nguyen Hong Quan says his ministry plans to create major construction groups engaged in key areas as the best system to promote the sector’s development. Deputy Minister of Construction Dinh Tien Dung said the change would aim to raise the enterprises’ competitiveness. “The charter capital of equitised construction companies at present is small,” said Dung, “Up to 59 percent of the companies have capital of less than10 billion VND and only about 16.4 percent have charter capital over 20 billion VND. Inadequate capital was a primary barrier to business expansion and limited these companies’ competitive edge, said Dung. If Vietnamese construction companies wanted to compete with international construction groups, he added, it was also very important for them to have expertise in various domains ranging from consultancy and engineering to installation. Dung hoped the merger of several construction companies into groups would be the proper solution for Viet Nam in the context of international integration. Duong Khanh Toan, director general of the Dong Da Corporation, said the plan to restructure 18 construction companies into groups under the parent-subsidiary model of organisation would help avoid overlap in contracting relationships between different units involved in the same project, enhancing their comparative advantages. He noted, however, that reorganisation would still not entirely erase the problem of inadequate capital. “The Song Da Corporation has asked the government to extend loans to help it increase its charter capital,” Toan said. Nguyen The Thanh, chairman of the management board of Lilama Corporation, said his corporation has completed the equitisation process but its assets were still not accurately valued, hindering its ability to secure financing. “Lilama is a strong parent company, but its affiliated companies remain weak,” he said. Truong Quy Ky, chairman of the management board of Construction Co. No. 1 noted that even equitised companies still remained largely in the hands of the State, with 50-70 percent of capital controlled by the State Capital Investment Corporation or the ministry. He emphasised the importance of defining enterprises’ responsibility for paying dividends and the division of State capital in the reorganisation of companies into groups. Nguyen Dang Can, chairman of the management board of the Viet Nam Construction and Consultancy Corporation, concurred, noting that the Ministry of Construction presently had nine independent units operating within the ministry. If these units were joined into a group, he said, the units and their relationship to the parent company needed to be properly regulated under the Law on Enterprises. Ky suggested the ministry create a capital investment company. In the parent-subsidiary model, he said, the parent company plays a dual role, managing the capital assets of its holdings in its subsidiary companies, and managing business operations. “I don’t think the parent company can perform the two roles properly at the same time,” Ky said.-Enditem
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